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What you need to know if you’re selling your business

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Forty-one per cent of businesses in North America are owned by baby boomers between 55 and 75 years old. These people are actively thinking about retirement and how they will get their money out of the business.

Research shows that, in many cases, up to 90 per cent of a business owners’ equity is tied up in their business. This is a problem if you own a business and plan to use that money you’ve invested to pay for your retirement years.

Unfortunately, according to Tom West – a leading authority for business brokers and the author of the Business Reference Guide – only 25 per cent of small businesses ever sell. Most are closed and sold for assets.

West breaks it down further: he estimates that only 20 per cent of businesses with sales under $500,000 with four employees or less and those with sales of less than $1 million which typically have five to nine employees actually sell. Companies with sales of $1 million to $2.5 million sell approximately 25 per cent of the time, and those with sales of $2.5 million to $10 million typically sell 33 per cent of the time.

And there’s competition if you want to sell your business. Twenty-eight per cent of owners surveyed by BizBySell said they plan to sell in the coming year, either due to retirement (52 per cent) or burnout (38 per cent).

So making sure you have a plan to sell your business, just as you had a plan to grow the business, is important.

How much can you get for your business?

According to the BizBySell Insight Report, businesses that sold for $1 million or higher in the last year averaged a .93 revenue multiple and 3.67 cash flow multiple. This means if your business made $40,000 at the end of the year, you might only be able to sell it for $146,800, plus your assets.

In light of this, I’m sure some boomers wish they had spent the last 35 years working for a large corporation or a government where they could walk away with a $1 million or more in pension over 25 years. Unfortunately, only a select few are entitled to those pensions.

More advice on running your business

If you want to be able to sell your business, you need to focus on the following areas:

Selling your business is perhaps the most important factor in your successful retirement. Understanding what you can do to influence your success in selling your business can reduce your stress and help you set realistic expectations.

Dave Fuller, MBA, is an award-winning business coach and a partner in the firm Pivotleader Inc. Questions about your business? Email dave@pivotleader.com. For interview requests, click here.


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